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The Time I Bid Too Low and Lost the Job

by Ryan Battles on August 05, 2013 in Freelance Success

I have tried a few pricing strategies over the years. When I first started out freelancing, I was so eager to get the work that I tried to price myself cheaper than the competition. I had plenty of work, but was also hardly getting paid for my long hours, I may have even been coming in under minimum wage. I slowly started raising my rates based off of the experience that I had in my portfolio, and eventually started making more of a fair wage. Naturally, I wanted to see how high I could take this pricing for my services before clients started saying “no”, and eventually I found what I thought was a sweet spot.  I had settled on a dollar figure for my hourly rate that both I and my new clients were happy with. The only catch with this billing method is that my income was directly tied to a unit of time. If I took a week off, I didn’t get paid for a week. 

One day, however, I learned a powerful lesson, one that would change the way I look at pricing my services forever. 

The Lose

It started off as what seemed to be a typical inquiry for work. I looked over the request, called up the client and learned more about what they needed, felt like I had a grasp of the scope of work, and started putting together a proposal. What the client wanted was around 30 websites, each one about 3 pages, and each one with the exact same layout as the others, the only thing that would change is the content, and the primary color in the theme. These sites also had to share some snippets of content with each other (for example, the parent company’s bio). To make things even easier, they already had the design that they wanted for the site ironed out, and would provide that asset to me to base the project off of.

Fortunately, I was familiar with a tool called ExpressionEngine that would enable me to easily build one of these sites using a multi-site manager setup that they offer, setup a simple control panel for choosing that primary color for each site, and with the click of a few buttons, duplicate each site entirely after building just the first one. All-in-all, from a development standpoint, I didn’t see this job taking me more than a few weeks (and that’s adding a lot of padding for uncertainties).  

After a few more conversations with the client I had ironed out any remaining questions that I had and sent over my proposal. I outlined exactly what I would be able to provide them, other team members that I would pull in to help with any needed design elements,  and a reasonable timeline for completing this work.

As far as pricing goes, I knew that this company was budgeting quite a bit to get this project done, I picked this up from some of the conversations that I had with the client beforehand. So when it came to putting an exact number down, I went to the higher side of what I thought the job was worth. In fact, I estimated the highest price for a project that I had ever bid. 

I sent the proposal, and started dreaming of the vacation I would take after this project with the huge amount of income that it would generate.

A week later, I got the call. I lost the project. I knew I shouldn’t have gotten greedy, I knew I should have been more conservative with my bid. 

I asked the client, “If you don’t mind, can I ask what was the deciding factor that led you to chose another company?” They responded that they thought my bid was too low. Way too low. Most of the bids that they were receiving were for around $100,000, some even over $200,000. Mine was nowhere near that. 

They went on to tell me that my proposal made sense, and I seemed to understand what they needed done, but for some reason it didn’t sit right with them that my bid was so low, when so many more were so high. Perhaps there was something they weren’t seeing, and this fear of theirs caused them to go with one of the high bids. 

I proceeded to ask them questions about what they needed, perhaps I was missing some detail. However, the more I asked, the more I was certain that I not only understood the project, but I knew exactly how to do it in a cost effective way (largely in part to the tool that I knew that I could use to accomplish the task). However, their minds were made up (committee vote), and I had to say goodbye to that project.

The powerful lesson that I learned was this: The monetary value of a project has less to do with how much time it takes you, and more to do with the perceived value it brings to the client. Even though my solution would have brought the same value to the client in the end, at a much lower price, they perceived that the other bids were going to bring more value, partially because of the much higher price. 

The Win

To put this theory to the test, a few months later I was in a position to bid on another large project. Through a little bit of guesswork and a little bit of hinting during conversations with the client, I knew about the cost that some other proposals were coming in at. Even though I would have been happy doing the project for less than these other proposals, and therefore may have won the project by being the lowest bid, I decided to try to present the most perceived value, and consequently throw out a much higher bid than the others.

If I were to be perceived as the best, my proposal better look like it comes from the best. Some people advocate for a short and simple proposal, but I knew that this organization was going to involve a board in this decision, and perhaps coming across as highly professional would be a better idea than coming across as concise and clear. My proposal was 25 pages long. I cut to the chase quickly, providing them with some numbers and a timeline, but then in the subsequent pages I outlined how I would approach the project, tools I would likely use along the way, potential roadblocks that would need to be addressed that may cause variables, and then a few case studies of other projects that I had done, accompanied by positive testimonials from those clients.

I won the project by a unanimous vote of the board.  They even told me that I was higher than the others, but they all believed that the added expense was worth it for my professionalism and experience.

Was I more experienced than the others? Was I more professional overall than each of them? That’s difficult to ever know, but in the end all that really matters is how much the client perceived their experience and professionalism before accepting the bid.

This project went on to become one of the best projects that I ever took part of. Not only because the sufficient income that made me super-willing to go above and beyond to meet their needs, but also because they saw me as a higher-end professional, and put a lot more trust in what I was building for them. They still gave appropriate feedback, and I insisted on it along the way, but they were always respectful of how I build things and why I suggested that they do some things a certain way. In the end we were all happy, and their case study and testimonials went on to become another powerful tool in my business.

The Lesson

Of the many pricing strategies that I’ve tried over the years, what I have found to be the most effective is to get to know the client and their problem as deeply as possible before putting together a proposal. Then, don’t sell yourself short, price your project according to the value that you will bring to the client, influenced by what it will take to help that client see that value (and sometimes that is how high you price your services). Finally, aim to be the more professional service provider out there. Over-communicate and keep them in the loop, be quick to respond to emails, even if that response is that you’ll get back to them later in the week. Once they perceive your value appropriately, they’ll pay you handsomely for your services.

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